Schaeffer's Midday Options Update Features iShares Russell 2000 Index Fund, Adobe Systems, KB Home, and Circuit City

Business Wire, June 17, 2005

CINCINNATI -- Today's Schaeffer's Midday Options Update features iShares Russell 2000 Index Fund (NYSE:IWM), Adobe Systems (NASDAQ:ADBE), KB Home (NYSE:KBH), and Circuit City (NYSE:CC). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most-active calls and puts for the day.

The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU1M&PAGE=1 .

Options Update: Russelling Up Some Puts

Continued rallies in the crude-futures market and a wider-than-expected trade gap haven't managed to stifle the equity market, which is racking up minor gains in Friday's session. Triple-witching Friday is infusing trading pits with above-average volatility, but in mid-afternoon action, the bulls are still leading by a hair. The Nasdaq Composite has returned to positive territory after sinking into the red around 11:00 a.m.

A Gap of All Trades

The Commerce Department said Friday morning that the U.S. account deficit dropped by $195.1 billion in the first quarter, wider than the $188.4 billion deficit in the fourth quarter, and more dramatic than economists' forecasts for a $190 billion gap. The deficit now represents a record 6.4 percent of the Gross Domestic Product (GDP. Looking only at goods and services, which generally account for about 90 percent of the total account deficit figure, the gap totaled $171.8 billion, compared to $169.2 billion the previous quarter. In short, this sustained decline revealed that American consumers continue to ramp up their amount of purchases from overseas.

Michigan States

The University of Michigan reported its consumer sentiment index for mid-June in mid-morning action. The index ramped up to 94.8 from 86.9 in May, taking out Wall Street's consensus forecast of 75.3. The current index rallied to 110.4 from 104.9 the previous month, while the expectations index moved to 84.8 from 75.3. Analysts are crediting this boon in consumer sentiment to stronger economic data and a recent pullback in oil prices. So can this trend continue, or is it a self-perpetuating cycle? Read yesterday's observation by Rick Pendergraft, "Market Update: A Direct Correlation, I Think" (www.schaeffersresearch.com/commentary/observations.aspx?click= home&ID=13426)(Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.) for further enlightenment.

A Photoshop Finish

Adobe Systems (NASDAQ:ADBE) took a much-anticipated turn in the earning confessional last night. In its second quarter, the parent of such graphic-design software as Acrobat and Photoshop netted profit of $149.8 million, or 29 cents per share. This figure topped year-ago results by 32 percent and exceeded analysts' expectations by two pennies per share. Revenue rose 25 percent during the period to $496 million. Looking ahead to the third quarter, the software sultan expects to collect 25-27 cents per share, surrounding Street expectations of 26 cents. This wasn't enough to impress investors, who have sent the stock more than four percent lower today. If you read yesterday's observation on ADBE(www.schaeffersresearch.com/commentary/ observations.aspx?click=home&ID=13422)(Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.) by my jovial colleague Joe Hargett, or subscribed to our Flash Event(www.schaeffersresearch.com/ shop/products.aspx?CODE=U105W&PORIDE=1&familyID=774)(Due to its length,this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.) real-time trading service, you would already know ADBE was vulnerable to such a decline, due to overly lofty expectations. Adding insult to injury, Oppenheimer & Fulcrum lowered its estimates for ADBE. In other news, ADBE warned of a shareholder lawsuit regarding the firm's plans to acquire Macromedia. ADBE officials say the suit is "without merit," and Oppenheimer and Fulcrum concurred that it should not be an issue of concern.

The Home Fires are Blazing Infernos

Joining ADBE in the earnings booth last night was KB Home (NYSE:KBH) , to decidedly different results. The stock has shot more than eight percent higher today to reach a new 52-week high. In its second quarter, KBH collected $2.06 per share, which competes favorably with year-ago results of $1.20 per share and analysts' expectations of $1.78 per share. Homebuilding revenue grew by 37 percent during the period to $2.11 billion, thanks in part to a 14-percent rise in the average sale price of homes. Smith Barney boosted its rating on the shares to a "buy" from a "hold" earlier today, while JMP Securities upgraded the stock to a "strong buy" from an "outperform."